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Saudi Arabia
Capital Account
During the early 1980s, current account surpluses led to a sharp
increase in foreign asset holdings (see table 11, Appendix). As
a result, the capital account was dominated by outflows from both
official institutions and the private sector. With the current
account registering sizable deficits after 1983, the capital account
has seen a reversal of these trends. A reduction of foreign assets
was followed by a significant inflow of banking sector capital
for the purchase of Saudi development bonds. The private sector
only began repatriating capital after the Persian Gulf War ended.
For much of the 1980s, private individuals and companies placed
a substantial amount of funds overseas, a process that accelerated
following the fall in oil prices in 1986 and as a result of the
Iran-Iraq War. Increased confidence in the Saudi economy after
the Persian Gulf War caused the return of these funds. The inflow
of private capital in 1991 allowed SAMA to stabilize official
foreign exchange holdings and spurred economic activity in the
nonoil sector. Official asset flows constituted the bulk of current
account financing, a process that became unsustainable following
the massive depletions to pay for the Persian Gulf War costs.
As a result, the government has engaged in significant commercial
borrowing on the international markets and instructed some of
its public enterprises (notably Saudi Aramco and Sabic) to do
the same. With the expectation that Saudi Arabia will continue
to run current account deficits during the foreseeable future,
it is likely that the capital account will be dominated by debt
flows and a good measure of private sector asset repatriation.
Data as of December 1992
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